The ski business

Winter wonderlands

AMERICA'S ski slopes have recently claimed the lives of two well-known politicians, Michael Kennedy and Sonny Bono. This has put skiing on the front pages of the newspapers, and generated a farcical debate about whether authorities should introduce speed limits, make helmets compulsory or otherwise take the fun out of a sport that thrives on thrills. But anyone who turns to the business pages will notice skiing cropping up there too. Business in America, it seems, has belatedly discovered the slopes, and is schussing ahead in an effort to overhaul the industry.

Although skiers themselves live for excitement, the business of running resorts has been dull for decades. The baby boomers who helped the industry take off in the 1960s are now older, and the number of young adults, who provide most new recruits, has declined. Add to this an ownership structure so fragmented that nobody can afford fancy advertising or first-class management, and you have a formula for stagnation. Over the past decade the number of “ski days” (the number of skiers multiplied by the number of days they spend skiing) has grown by less than 4%, reaching 54m in 1995-96.

All that is now changing. America's biggest ski-resort chains have been buying many smaller resorts, and investing in new hotels, ski-lifts and snow-making equipment. Three chains have even listed themselves on stockmarkets in the past couple of years—something previously unheard of. These consolidators hope to transform America's most popular mountain tops from a collection of isolated peaks into sprawling winter Disneylands.

A $315m spending spree has left Vail Resorts, one of the most ambitious companies, with 40% of the Colorado market, including the country's three most popular resorts. Intrawest, a Canadian company, owns resorts spanning the continent's mountain ranges, from the Laurentians in Quebec to the Sierras in California. In November the American Skiing Company, which already owned six resorts in New England, spent $288m on a pair of resorts in Colorado and California. Even so, skiing remains fragmented by the standards of the leisure industry—the largest company, Vail, accounts for only 9% of the market.

The big resort chains have several advantages. The first is comfort. Pain used to be the price of admission into the skiing fraternity, but the new American resorts try to protect their skiers from all that nasty wind and snow. The gondolas are warm and capacious. The snow is neatly groomed. Beginners can hop on moving walkways when they tire of taking tumbles.

The chains are also expanding the range of activities on offer, such as ice skating, sledging and dog-sledging, snowmobiling and—for the truly tame—“tubing” (ie, sliding down the slope on the inner-tube of a lorry-tyre). They are also providing after-ski activities, ranging from cheap pizza joints to $20,000-a-year lunching clubs.

The idea is to turn the big resorts into full-fledged winter theme parks, attracting more beginners and families to the slopes. By broadening into accommodation, skiing lessons and other activities, the big chains also hope to capture more of the industry's profits. Historically, ski companies have been content to be little more than lift operators (as they still are in Europe), allowing local businesses to cream off most of their potential income. Even in America, the typical skier still hands less than 20% of his holiday cash to the resort owners.

Vail, by contrast, earns so much money from other activities that it stops charging for its gondolas in the evening. It manages six hotels, 72 restaurants, 40 shops and over 13,000 condominiums. The American Skiing Company has a capital expansion program of $105m for the winter of 1997-98, which it will use for new hotels, lifts, snowmaking equipment and trail expansion.

Money is also bringing marketing flair. The three publicly quoted chains have introduced loyalty programmes and flexible pricing. Vail, whose new boss, Adam Aron, was one of the pioneers of air miles, has a marketing budget of more than $20m. The American Skiing Company has joint-marketing agreements with Budweiser, Pepsi and Visa, and sends 300,000 copies of its “Sno” magazine to its regular customers.

Investing in an industry that is so vulnerable to both divine and human intervention is not without its risks. Expensive ski holidays are one of the first things to go when the economy sours. Then there is the weather. Artificial snow can make up for a thin snowfall, but it is expensive. And bad storms can still leave resorts inaccessible: last year, floods and mudslides closed one of the main highways to Lake Tahoe.

Even when nature co-operates, her protectors may not. Environmental regulators often impose fines on resorts, and sometimes close them down. Even the father of theme parks proved no match for the earth's self-appointed guardians. In the early 1960s Walt Disney conceived a grand project for a giant ski resort between Los Angeles and San Francisco, complete with a fake Alpine village, but a blizzard of environmental lawsuits snowed him under.

That said, the outlook is still good. The industry is now gearing up for the arrival of the baby boomers' children, the “echo boomers”, whose numbers will swell to nearly 61m in the next decade. This is partly due to the snowboarding craze. Snowboarders now account for 14% of the market, and “SNOWboarding Business”, a trade magazine, expects that share to double over the next five years. Snowboarders and skiers are mortal enemies—but the resorts are happy to take money from both. Resorts have also received a boost from the emergence of “fat” (or parabolic) skis. These make it easier to learn how to ski, and easier to keep skiing later in life.

Critics complain that smaller resorts are being driven out of business, taking their quirky ways with them. The number of resorts is indeed shrinking—there are 507 of them in America now, 28% fewer than in 1986. But skiers are voting with their skis and snowboards: in 1986-96 Vail increased its business by 39% in an otherwise stagnant market. The Disneyfication of America's winter sports looks unstoppable.